Refund Of Pre-July 2022 Accumulated ITC Cannot Be Denied Based On CBIC Circular: GSTAT Hyderabad

The Hyderabad Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) on 27 October held that refund of input tax credit (ITC) accumulated under an inverted duty structure before 18 July 2022 cannot be denied merely because the refund application was filed later.

A Bench of Judicial Member Sushil Kumar Sharma and Technical Member Duvvuri Krishna Srinivas ruled that an executive circular cannot retrospectively restrict refund claims for an earlier period, and allowed Kedia Agro's appeal against the rejection of its Rs. 61.47 lakh refund claim and set aside the orders of the original adjudicating authority and the first appellate authority. It observed:

“ITC is a right accrues to the assessee on the date when dutiable goods / services were bought in the course of furtherance of business. Such a right can't be curtailed by the interpreting an executive circular by giving it retrospective effect, without any statutory / legal backings.”

Kedia Agro, a manufacturer and supplier of edible oils, accumulated unutilised ITC because the GST rate on certain inputs exceeded the rate applicable to its outward supplies. The company's refund claim related to May 2020 to March 2021. It initially applied for a refund of Rs. 65.04 lakh on 18 June 2022 but withdrew that application and filed a fresh claim for Rs. 61,47,671 on 25 March 2023.

The Assistant Commissioner of Central Tax, Mehdipatnam GST Division, rejected the fresh application on 23 May 2023, relying on Notification No. 09/2022-Central Tax (Rate), which came into force on 18 July 2022, and Central Board of Indirect Taxes and Customs (CBIC) Circular No. 181/13/2022-GST dated 10 November 2022. The first appellate authority upheld the rejection on 28 March 2024.

The department maintained that the restriction on refunds for specified goods under Chapters 15 and 27 applied because the fresh application was filed after 18 July 2022. It argued that the withdrawn application could not preserve the company's entitlement under the earlier position and that the fresh claim had to be examined under the provisions applicable on the date of filing.

Kedia Agro argued that the ITC had accumulated before the restriction took effect and that its fresh application was within the limitation period prescribed under Section 54 of the Central Goods and Services Tax Act, 2017. It contended that the date of filing could not determine eligibility for a refund relating to an earlier tax period.

The Tribunal held that Notification No. 09/2022-Central Tax (Rate) could not restrict refunds of ITC accumulated before 18 July 2022 merely because the application was filed later. It further noted that various High Courts had struck down the CBIC circular to the extent that it applied the restriction based on the date of filing the refund application.

Accordingly, the GSTAT remanded Kedia Agro's Rs. 61.47 lakh refund claim to the original adjudicating authority for fresh consideration in accordance with law, including examination of its claim for interest.

Counsel for Appellant: Arpan Bohra

Counsel for Respondents: Gouri Shankar and Benu Gopal